Joint Patent Infringement – When a User Controls the System and Obtains a Benefit Therefrom Without Possessing All Claimed Elements

Joint patent infringement was the focus of the Federal Circuit (the patent appeals court) in Centillion Data Systems, LLC. v. Qwest Communications International, Inc., Case No. 2010-1110 (Fed. Cir. Jan. 20, 2011)(available here). Per the Court, “[w]e hold that to ‘use’ a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it.” Slip opn. p. 8 (herein “P.8″), citing NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1317 (Fed. Cir. 2005). In Centillion, the Appeals Court reversed and remanded the case back to the trial court stating that “[w]e decline to determine for the first time on appeal whether any individual customer has actually installed the Qwest software downloaded records, and analyzed them as required by the claims [] [b]ecause the issue has not [] raised on appeal here … [and] Qwest may have induced infringement by a customer.” P. 12.

Centillion’s patent covers a computer system for collecting, processing, and delivering information from a service provider, such as a telephone company, to a customer. See Patent No. 5,287,270. Qwest, a telephone service provider, enables a user to monitor and track services. Patent Claim 1, as described by the Federal Circuit Court, “requires ‘a system for presenting information . . . to a user . . . comprising:’ (1) storage means for storing transaction records, (2) data processing means for generating summary reports as specified by a user from the transaction records, (3) transferring means for transferring the transaction records and summary reports to a user, and (4) personal computer data processing means adapted to perform additional processing on the transaction records. Centillion concedes that the claim includes both a ‘back-end’ system maintained by the service provider (claim elements 1, 2, and 3) and a ‘front-end’ system maintained by an end user (claim element 4).” P. 3.

The accused products include two parts: Qwest’s back office systems and front-end client applications that a user may install on a personal computer. Customers who sign up for the accused products are permitted to use a monthly electronic billing information. Qwest also provides software applications that a user can choose to install on a personal computer. A customer may take advantage of the electronic billing information without installing the software, but the software allows for additional functionality. Customers access data by download. See p. 3.

The trial court held that Qwest was not liable for direct patent infringement of Centillion’s computer system claim because that claim requires both a back office system and a personal computer operated by a user. Qwest did not “use” the patented system. The trial court held that “use” was defined as “put[ting] the system into service, i.e., . . . exercis[ing] control over, and benefit[ting] from, the system’s application,” citing NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005); BMC Resources Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007); and Cross Medical Products v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293 (Fed. Cir. 2005). See P. 4.

The appellate court specifically defined “use” and held that “to ‘use’ a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it,” citing NTP, 418 F.3d at 1317. P. 8. Therefore, to support a finding of direct infringement by “use of a system” the accused “party . . . [must] use each and every . . . element of a claimed [system]” and in order to “put the system into service,” the end user must be using all portions of the claimed invention. “For example, in NTP, the end user was ‘using’ every element of the system by transmitting a message. It did not matter that the user did not have physical control over the relays, the user made them work for their patented purpose, and thus ‘used’ every element of the system by putting every element collectively into service.” P. 8-9.

The Federal Circuit Appeals Court held that Qwest’s on-demand function (when a customer seeks particular information and Qwest’s back-end system provides a result as a download) is a “use” of the system as a matter of law. The customer puts the system as a whole into service, i.e., controls the system and obtains benefit from it. “The customer is a single ‘user’ of the system and because there is a single user, there is no need for the vicarious liability analysis from BMC or Cross Medical.” P. 10.

Since there was no evidence of record that any individual customer had actually installed Qwest’s software for downloadable records, the Federal Circuit reversed the trial court’s ruling of non-infringement and remanded the case back to the lower court.

The Federal Circuit found that Qwest was not vicariously liable because Qwest does not direct its customers to perform the downloadable acts nor are its customers agents of Qwest. P. 14.

“Qwest does not ‘make’ the patented invention under § 271(a) as a matter of law. Qwest manufactures only part of the claimed system. In order to ‘make’ the system under § 271(a), Qwest would need to combine all of the claim elements—this it does not do. The customer, not Qwest, completes the system by providing the ‘personal computer data processing means’ [claim element 4] and installing the client software.” P. 16.

The Court did not consider whether Qwest induced infringement of Centillion’s patent because that issue was not raised in the lower court.

This case shows the importance of drafting an entire patent claim from a single perspective. The reference in claim element (4) to a personal computer will continue to be an issue for Centillion.

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